Several high-profile scandals for banks ranging from JPMorgan’s hefty trading loss to UBS’s rogue trader have sparked a regulatory drive to force lenders to spend more time and probably hold more capital guarding against such operational risks.
Both the Financial Stability Board, the global banking regulator, and the Basel Committee on Banking Supervision, which sets global capital rules, have recently announced plans to tackle the issue next year as part of efforts to make the world’s biggest banks safer.
Operational risk covers almost any problem – bar trading losses, bad loans and legal cases – that could damage a bank, such as the weeks of computer problems at Royal Bank of Scotland. The “London whale” trading scandal at JPMorgan cost the bank more than $6bn in losses and unauthorised trading by Kweku Adoboli led to losses of $2.3bn at UBS. In Britain, the payment protection insurance debacle has cost the UK industry more than £10bn.